Swiss National Bank- SNB scraps 1.20 floor, which was the minimum exchange rate limit since 2012. Right after the news EUR/CHF pair tumbled not only below 1.20 but all the way to 0.80 levels.
Swiss National Bank scraps its minimum 1.20 EUR/CHF exchange rate and lowers interest rate to –0.75% at the same time the SNB lowered the interest rate on sight deposits which exceed a given exemption threshold by 0.5 percentage points, to −0.75%. It is moving the target range for the three-month Libor further into negative territory, to between –1.25% and −0.25%, from the current range of between −0.75% and 0.25%.
In the press release it is mentioned that the euro has lost a considerable ground against the USD which made the CHF lose value against dollar as well. Hence the Swiss national bank concluded that enforcing and maintaining 1.20 minimum exchange floor for the CFH against EUR is no longer justified nor helping the Swiss economy.
How should you translate this news to your trading strategy? Should you sell CHF now?
Immediate reaction has taken place, putting the market under shock. When there is shock there is unexpected movements. Hence right now the dust is yet to be settled. However opportunities will rise in EUR/USD, bearish opportunities.
As the Greek elections are getting close by, the fear of Greek Exit also rises. How strong is the possibility? We think there is a significant risk as the majority of the big banks are taking measures. even the SNB took its measure by staying in the safe side. Nevertheless, the potential for EUR/USD to go down stay high and we believe there is a chance for EURUSD to hit 1.10 and 1.00 levels and in every correction opportunity traders should look for shorting EURUSD, until the 25th of January when the Greek elections are concluded and we have a clear outlook for the market to see where the second phase of the economic developments will lead us.
As the news came some brokers locked CH. Click here to see which brokers blocked CHF trading